College Financial Aid Guide - Demystifying the Financial Aid Process

FAFSA, EFC, Stafford, PLUS — Huh? Colleges seem to speak a foreign language when the subject turns to money. But the basics are simple.

By Kim Clark Posted 2011

College Financial Aid Guide

Financial aid is simply money that helps you pay for college, get the complete U.S News University Directory Financial Aid Guide here. There are three kinds:

Grants

Grants, also called scholarships or gift aid, are the best kind of financial aid. They are free money that you don’t have to pay back. Generally, grants are awarded for one of three reasons:

Need: The student has qualified as financially needy, usually by filling out the Free Application for Federal Student Aid (FAFSA), or the College Scholarship Service (CSS) Profile.

Merit: The student is being rewarded for good grades, athletic skill, musical talent, etc.

Employment benefit: The student or the parent qualifies for tuition assistance through an employer. Many universities, for example, give employees’ children a break on tuition.

Loans

Loans are debts that you have to pay back and are obviously not as good as grants. Some loans, such as federal Stafford and Perkins loans for students, are considered financial aid because taxpayers subsidize the rates so that students can borrow at a lower cost than they would get from a bank. A few charities and schools are even offering college loans at zero percent interest. The federal government calls its PLUS loans for parents financial aid. But many counselors note that some parents with good credit can borrow more cheaply from banks than from the PLUS program.

Work-study

The federal government subsidizes some campus and nonprofit jobs for students. Generally, work-study jobs are awarded only to students who the college says are financially needy. The jobs typically don’t pay especially well. Students may find better-paying jobs off campus. But work-study jobs have advantages. Their earnings don’t reduce the student’s future financial aid awards. Their schedules coincide with the school’s. They are typically on campus, which reduces any commute hassle. And they are typically limited to fewer than 15 hours a week, so they conform with studies showing that students who work between five and 15 hours a week actually get better grades than those who don’t work at all or work more hours.

Right Math = Total Costs

Having trouble figuring out just how much college is going to cost? Worried about raising the money you’ll need? We’ve gathered some of the most frequently asked questions and condensed the advice of dozens of experts into a few simple steps.

Look for the school’s total cost of attendance (COA) — which includes tuition, fees, room, board, books, travel, and miscellaneous living expenses — in the papers the school sent, or on its website.

If you can’t find the total COA, you can estimate it yourself by adding tuition, fees, room, board, and about $3,500 or so.

If you can’t find the COA, you can also call and ask the college financial aid office for the COA. Make sure they don’t just give you the total “direct costs,” which accounts for only tuition, fees, room, and board. Federal law requires schools to make available to students their official total cost of attendance.

Subtract the total of your free money (grants and scholarships) from the COA. If you have trouble with the math, ask the financial aid office for help calculating your out-of-pocket costs. Explain that you want your cost only after grants and scholarships have been subtracted from your total cost of attendance.